VAT deregistration in the UAE is an important process for businesses that no longer meet the criteria for VAT registration or have ceased their taxable activities. Understanding when and how to deregister is crucial to avoid penalties and ensure compliance with the UAE’s tax regulations.

This guide will provide an in-depth look at VAT deregistration in the UAE, including the process, mandatory and voluntary conditions, and common pitfalls.

VAT Deregistration in the UAE Explained

VAT deregistration is the process of canceling a business’s VAT registration with the Federal Tax Authority (FTA). Once deregistered, the business is no longer liable to charge VAT or file VAT returns. However, deregistration is only allowed under specific circumstances, and it is important to ensure that your business meets these conditions before proceeding.

Who Needs to Deregister for VAT in the UAE?

Deregistration from VAT can either be mandatory or voluntary, depending on a business’s circumstances.

1. Mandatory Deregistration

Businesses are required to apply for mandatory VAT deregistration if:

• The business’s annual turnover falls below AED 375,000
• The business has ceased supplying taxable goods or services

If your business continues to file VAT returns despite no longer meeting the requirements, the FTA may impose penalties.

2. Voluntary Deregistration

Voluntary VAT deregistration applies to businesses whose turnover has dropped below the voluntary registration threshold of AED 187,500. However, businesses must ensure that at least 12 months have passed since their initial VAT registration before applying for voluntary deregistration.

A business may opt for voluntary deregistration if:

• It no longer supplies taxable goods or services.
• Its turnover has been consistently below the voluntary registration threshold.
• It is permanently closing or ceasing operations.

Steps for VAT Deregistration in the UAE

The process for VAT deregistration in the UAE is straightforward but must be followed carefully to avoid complications. Here’s a step-by-step guide:

1. Meet the Criteria: Ensure that your business meets the conditions for either mandatory or voluntary deregistration.
2. Submit a Deregistration Request: Log in to your FTA account and fill out the VAT deregistration form. You’ll need to provide detailed reasons for deregistration.
3. Clear Any Outstanding Liabilities: The FTA will not approve your deregistration request unless all taxes and penalties have been paid in full.
4. Application Approval: After submitting the application, the FTA will review it. If all criteria are met, your application will be approved, and the VAT number will be canceled.
5. Receive Confirmation: Once approved, you’ll receive an SMS confirmation of the deregistration.

Consequences of Failing to Deregister

Failing to apply for VAT deregistration when required can lead to administrative penalties of up to AED 10,000. Additionally, businesses that fail to submit the application within 20 business days of becoming eligible for deregistration may face further sanctions. Ensure that all required VAT returns are filed, and any outstanding liabilities are settled before proceeding with the application.

Common Mistakes in the VAT Deregistration Process

Here are some common mistakes businesses make during the deregistration process:

• Not Clearing Outstanding Taxes: The FTA will not approve a deregistration request if there are outstanding taxes or penalties.
• Filing Late: Delays in applying for deregistration can result in significant fines.
• Incomplete Application: Ensure that all required documentation, such as the company liquidation letter, is submitted along with the application to avoid rejection.

VAT Deregistration for Groups

For companies registered under a VAT group, deregistration can be more complex. The FTA will allow a group to cancel VAT registration if:

• The group no longer meets the eligibility criteria.
• The businesses in the group are no longer financially linked.
• There is a risk of tax evasion if the group remains registered.

How NH Management Can Assist You with VAT Deregistration

VAT deregistration in the UAE requires careful attention to detail and adherence to strict timelines to avoid penalties. Whether your business needs to deregister voluntarily or mandatorily, it’s essential to follow the correct procedure and clear any outstanding liabilities.

At NH Management, we specialize in navigating the complexities of VAT deregistration in the UAE. Our experts ensure that your business meets the necessary criteria and handles all aspects of the process on your behalf, from submitting the deregistration request to resolving outstanding tax liabilities.

If you’re unsure whether your business qualifies for VAT deregistration or need assistance navigating the process, NH Management offers professional consultancy services to simplify the process and ensure compliance. For expert guidance on VAT deregistration, contact us today and schedule a free one-hour consultation with our VAT specialists.

We also offer a range of VAT services, including:

• VAT registration and compliance
• VAT impact analysis on cash flow
• VAT training for business owners and staff
• Comprehensive tax advisory services

By partnering with NH Management, you can ensure that your business remains compliant with UAE tax laws while efficiently managing your VAT obligations. Talk to our consultants today via info@nhmanagement.com or +971 4 2221327.